Chemical sector in Gujarat reels under slowdown, China pressure

6:07 AM, 15th December 2015

Economic slowdown coupled with increased dumping from China has taken its toll on the chemical industry, which accounts 35 percent of the country’s total output.

AHMEDABAD, INDIA: Economic slowdown coupled with increased dumping from China has taken its toll on the chemical industry in Gujarat, India. Over 350 chemicals units in major industrial clusters of Ahmedabad, Ankleshwar and Vapi have closed downed their shutters.

The moratorium imposed by the Union environment ministry and escalation in production cost has further added to the woes of chemical manufacturers.

Majority of chemical units in Gujarat, which accounts for 35 percent of the country’s total output, are at present operating below 40 percent capacity. The Rs 6,200-crore chemical industry has also witnessed a dip of 20 percent in exports over the last few years.

“Many units have turned sick due to government policies and stiff competition from China. The sector has seen negative growth of 8-10 percent this fiscal,” said Jaimin Vasa, president of the Gujarat Chemical Association (GCA).

Gujarat produces around 6,600 types of chemical products and accounts for 18 percent share in India’s chemical exports and over 80 percent in dyes and intermediates' production.

Of the total 1,200 units in Ankleshwar, nearly 400 are chemical units. “Moratorium on Ankleshwar has hit the chemical sector hardest. The units are running at 40-50 percent of their capacity for the last one year. While production has more or less remained the same in last 5-6 years, manufacturing costs have doubled,” said Chandresh Devani, president at the Ankleshwar Industries Association.

Meanwhile, in Vapi which has around 600 small, medium and large chemical units, 25-30 units have closed down and many others have faced temporary closure in last one year.

The international market too has become stagnant and demand from markets such as Europe, South America, Egypt and Sri Lanka have fallen.

“Downfall in exports has hit the industry badly. Also, even after securing lowest score on pollution, Vatva continues to remain in the critically polluted zone leaving no space for expansion,” said Bipin Patel, senior VP at Gujarat Chamber of Commerce & Industry (GCCI). Many units have even altered their products in a bid to survive the slowdown.

Chemical sector in Gujarat has 11,302 units, (Micro- 6376, small- 1933, medium- 1206, large- 1787)that employees1.2 lakh people with annual production of 4.2 lakh metric tonne and the worth of production is Rs 6273 crore.

The zones which are under moratorium or critically polluted - Vatva (400 units), Ankleshwar (400) and Vapi (600), the number of units closed in last 3 years is 300, total exports are down by 20 percent and production by 40 percent.